If you think the US S&P 500 has been non-stop bullish, have you seen Spain?

Spain’s Bolsa de Madrid IBEX 35 Index along with the related iShares ETF (symbol EWP) have been incredibly strong since the July 2013 low, overtaking the S&P 500 on a Relative Strength basis.

Let’s take a look at Spain’s strength and what’s happening now:

Through 2013, Spain’s IBEX traded within a declining parallel trendline channel pattern which experienced a clean price breakout into August.

After a small “abc” retracement back to test the falling upper trendline into the 8,400 level, buyers have been relentless and sellers have been exiting (buying-back to cover losses) which helped propel the index in an almost non-stop positive feedback loop or pro-trend impulse to the upside.

The recent breakout gap above 9,500 has been extremely strong, similar to the persistent upside action off the 8,400 level in September.

The index recently traded into the 10,000 ’round number’ resistance target and sellers took their swipe after two days of “doji” reversal candles into the overhead index target.

Should the downside retracement continue, the logical initial target would be the rising 20 day EMA into 9,625 (rising sharply).

Note the prior sharp two-bar retracement to the rising 20 EMA into October.

Otherwise, watch the 9,800 level for potential “in mid-air” support.

The chart picture is similar on the tradable iShares ETF – EWP:

With the EWP fund, we can also see volume rising since the low in July 2013 – we see this both visually in volume itself and the blue 10-day average volume line.

Finally, let’s take a look at a Relative Strength graph of the IBEX to the S&P 500:

In the chart above, the US S&P 500 is displayed as a blue line (scaled on the left) while Spain’s IBEX appears as a green line (scaled on the right side).

The Relative Strength grid at the bottom is more important than the pure price comparison of the indexes.

I scaled it in terms of Spain’s strength where a falling RS Line (as from March to July) reflects Relative Weakness of Spain to the US S&P 500 and the bullish breakout reversal into a rising line from July to present represents Relative Strength of Spain to the US S&P 500.

A Relative Strength line chart can show reversals (via breakouts) in ongoing relative strength relationships which translates into trading opportunities. We typically want to trade long (bullish) in stocks or markets showing relative strength.

The concept of Relative Strength (line charts) is a lesser-used but important factor in market analysis.

Continue monitoring the relationship, strength in Spain, and interaction with the 10,000 index level in the IBEX.